iPhones, Androids, xBox: Will Real Workers Actually Make Them?

U.S. President Barack Obama looks at a screen next to Intel's Transmission Electron Microscope during a tour of the semiconductor manufacturing facility at Intel Corporation in Hillsboro, Ore., Feb. 18. Pictured with Obama is telescope lab manager Barbara Miner. Photo: REUTERS

The U.S. economy added no jobs in August and President Obama plans to outline some remedies this week. But this Labor Day, even technology, the industrial sector of tomorrow is ailing. While overall profits are growing, employment is shrinking.

The trend probably isn't going to improve. Last month, Hewlett-Packard, the world's No. 1 maker of PCs, said it planned to exit the business, most likely through a spinoff. HP has already sold big chunks of its former manufacturing complex in Cupertino, Calif., to rival Apple. Not that Apple actually makes many products there, either.

TechAmerica, the successor to the industry trade group founded in 1943 by Bill Hewlett and David Packard, confirms that employment is shrinking, too. While 2010 statistics remain incomplete, they surely will be worse than 2009, when overall technology employment was 5.9 million Americans, down 4 percent from 2008.

The statistics also show there's little immunity from downturns in tech employment, either. While the total for high tech manufacturing fell 8.2 percent, communications jobs lost 3.9 percent, followed by engineering, 3.6 percent, and software, 1.2 percent.

Software was always regarded as being immune to labor-saving but even with computer-aided design (CAD) and computer-aided engineering (CAE) products, the big designers can use tech products to automate. The telecom sector can use voice-response.

This drop is also bad for Uncle Sam, as well as for the governors of the top states with technology employees: California, Texas, New York and Florida. Why? Average annual tech wages were $84,400 compared with the national average of $45,400.

As researchers like IHSiSuppli predict smartphone shipments as high as 60 million tablets and 264 million smartphones this year, one thing looks clear: human workers will have less and less involvement in their manufacturing.

Rather, the sole human element will be concept and design. Getting people to buy them will require a little genius and making them must-have items will take what James Schrager, a professor at the University of Chicago's Booth School of Business, labels fashion technology.

Hon Hai's 70-percent-owned Hong Kong unit, Foxconn International Holdings, which makes most of the smartphones for Motorola Mobility and Nokia, said its net loss narrowed to $17.6 million from $142.6 million a year ago. Revenue eased 7 percent to $2.99 billion.

Foxconn factories in China were the subject of global attention in 2010 amid reports of many suicides among its workers who work long days under trying conditions.

Hon Hai Chairman Terry Guo said she planned to buy as many as a million robots for Foxconn's China factories. They already deploy 10,000 robots.

Foxbots will replace people for coating, welding and assembly, she said. Many will be assembled by Foxconn's Chinese workers. At least some tasks, such as polishing iPhone cases, will remain in human hands.

These kinds of problems clearly are on the minds of leading U.S. makers, headed by HP and Dell, No. 2, which reported slow second-quarter growth.

Foxconn is already the world's No. 1 contract manufacturer. If it is not thriving making iPads and the like, what will happen to some of its smaller competitors including U.S.-based Sanmina-SCI and Jabil Circuit, as well as Singapore-based Flextronics?

Not too long ago, former Apple CEO Steve Jobs decided to hand over virtually all the work of manufacturing to contractors like the old Sanmina, based around San Jose, Calif. Visitors could see harnesses for MacIntoshes at the factory with the Apple label.

But over time, those operations shifted offshore, to Singapore, Malaysia, Taiwan and now China, where even Hon Hai is having a hard time making money. As well, must-have products are getting thinner, lighter and shinier, with a touch and feel that makes them essential to what Chicago's Schrager calls fashion technology.

Not even Apple can sell iPads for $1,200, though, which means the contractors have to shave costs as much as possible. Amazon, which has already sold 17 million Kindles assembled by contractors, is expected to ship a Kindle tablet in the fourth quarter.

For sure, Amazon CEO Jeff Bezos, a Princeton-trained electrical engineer, has done the math. He personally patented a tablet. The manufacturers are eager for the business.

The same holds for all the smartphone makers in lieu of Google's plans to acquire Motorola Mobility to expand the Android market.

No matter what device the designers cook up, the contractors will be squeezed to take out as many costs as possible, so that the brand labels they slap on -- Apple, Amazon, Motorola, Nokia or whatever -- are attractively priced for profitable sales.

When HP discloses its fourth-quarter results in November, expect it to reveal costs involved with discontinuing the TouchPad as well as some of the thought behind CEO Leo Apotheker's decision to get out of the PC business.

Fashion technology electronics will keep getting more and more versatile, smaller and offer more kinds of pleasure than ever, ultimately involving TV and high-end entertainment.

But over the next five years, the biggest question may be: how will the contractors, mainly in developing countries, squeeze production costs out while keeping themselves and their customers profitable?